One of the biggest things that you’ll want to worry about is preventing from others stealing from you. You may not even realize it until it’s too late, and then when you look at the transactions, you find out they’re stealing from your business, embezzling a lot of money. This is more common than you’d think, and with smaller business, you’re more at risk, with 55% of embezzlement happening with 100 or fewer employees, and up to $1.3 million being taken, which is a lot of money.
Accounting is normally overlooked by many, but it’s super important, and if you maintain the proper internal controls for everything, you’ll be able to grow and prevent against fraud. You should initially look out for any pressure on financial issues on your employees, and make sure that you prevent it. Make sure there are no rationalization, or reason why, and no opportunities, or chances for embezzlement. These three factors are a big part, and here, we’ll talk about ways to prevent this from happening in your business.
First, separate the duties, especially by making sure you don’t have the same person working on accounts both receivable and payable, and making sure that you don’t have the same person preparing and auditing the books. This might be unavoidable at first, but later on separate them as much as you can, since this prevents embezzlement. For small businesses that can’t do this, sharing it can mitigate the risk.
Then there is access control, controlling who uses this. Make sure that you have everything password protected, and keep time-sensitive financial paperwork under lock and key. You don’t need to give this to just anyone.
You should also physically audit the accounts, and that’s counting inventory and cash to make sure that everything is there. Never have loose cash hanging around, and point it right away, but you may need to keep items in inventory, and if you do, always perform audits. The occurrence of things being stolen to sell off isn’t uncommon, so definitely consider this.
The more you standardize your documents, the better, and you should make sure that you have everything standardized, whether it be paint colors, invoices, expenses, and timecard. While this might not be related to fraud, having contractors submitting their bid in a work form is good because it will make sure everything is there, and it prevents unbidded items from happening, messing up the price and trying to compare on each project. You should make sure that you have all documents looking the same, so that it prevents fraud from happening, and allows for you to review the records if things go overlooked.
Trial balances are good too. Double-entry booking is good and making sure that you calculate the daily or weekly rial balances can give you insight on the system, and your business, preventing any discrepancies from happening as early as possible.
You should engage in period reconciliations, which means that you’re reconciling the accounts regularly to make sure that balances match the deposits and withdrawals on the bank statements and making sure all irregularities are covered, since finding these is often how fraud is discovered.
Finally, make sure you have approval authority on huge purchases, and you should have that on rehabs and turnovers over a certain amount, and you should look at all of the checks that go out before signing them, and you should always have approval authority before beginning with anything.
By taking these rightful measures, you can safeguard against larger transactions, and stop the worst types of fraud. And while your business might not be able to put all of these safeguards in immediately, you should think about this immediately whenever you hire employees, and you should make sure that you think about anyone who can steal from you, and make sure to keep this as low as you can.